Am I right? I compared D80's shots to the newly introduced 40D Canon camera. Again, am i right that the colors on the D80 are much more vibrant than the 40D? Thus, D80 produces a nicer picture. But the Canon 40d produces a sharper image?

Next question: If I'm buying the D80. What Lens would you recommend if I'm going to use it for a 12 month old boy? Family pictures, parties, gathering, and city travelling, and weddings, etc... I just want a single camera that an handle a group of people i.e. from left to right (wide angle) and I can Zoom it to a decent distane.. yet do some portraits. So what kind of lens would I need and how much would that cost me?

Lastly, do you guys..(kinda like my first question) do you also find the pictures taken by nikon cameras such as D40/X or D80 much better than the ones taken by a Canon Xti? (I think Canon pictures are more flatter and dull...and has more gray tones. The nikons, are livelier? am i right?)

Hi CoolNovember...
Don't let yourself be misguided by differing color-intensity as this is the easiest thing to manipulate with in-camera-settings. And from what I've heard, a Canon even alows for wider manipulation than the Nikon-bodies. So if "lively colors" are your thing, fret not, you can also produce them on Canon-bodies.
As to a baby/family/gathering/travelling-all-round lens go at least for a 18-120/135mm lens. That gives you much needed flexibility. Best in this class is the Nikon VR 18-200mm as it also gives you image stabilization which is very important for available-light photography. And you don't want to spoil your subjects by flash-light, don't you?

Beauty lies in the eyes of the beholder.
That said, i think it is clear which camera you prefers though both Canon and Nikon gives very decent pictures. Colour contrast can be adjusted in-camera to some degree.
As for your all-round lenses - i think 18-200 VR will suit you nicely